whburling[at]earthlink.net wrote:

- quote -

1) Not likely. Person A appears to have sold half his house to person B.
If you sell your house after living there for over 2 years, you can
have an untaxed gain up to $250K or $125K for half a house. So it
depends on the exact numbers.

2) Tax to whom? Unless the gain from the sale of B's home was over $250,
that transaction is over.

3) Well, B's payoff of the mortgage on A's property should have
simultaneously changed the deed to joint ownership and the numbers
should have been spelled out in a legal 'purchase and sale agreement'.

JOE

context:
two independent people, A and B

Person A owns a house with bank.
Person A lives in house in CT.

Person B owns a house.
Person B lives in house in MA.
Person B sells his home

With house B proceeds, person B pays off mortgage owned by Person A.
Persons A and B eventually create a co-ownership deed and live in house
previously owned by Person A. They may or may not marry.

Questions:
(1) is the mortgage payoff provided by person b considered taxable
(federal and state)income for person A?

Consider that Person A has no real gain. Person A
gives
up sole ownership for the benefit of having mortgage
paid off.

(2) is person B obligated to pay any tax given that his original source
of funds
was from the sale of his primary home (assume capital gain tax has
been
dealt with).

(3) is the timing of mortgage payoff and deed change critical for tax
purposes
(forget concerns about person B protecting his investment).